If you use Bitcoin in Australia, you would know you get taxed twice. Now, the government is moving to fix the issue.
Treasurer Scott Morrison’s remarks may have gotten a little lost amid the media maelstrom caused by the possibility of an early election in Australia, but he made an announcement Monday that should make digital currency enthusiasts cautiously happy.
At an event at Sydney fintech hub Stone and Chalk, Morrison launched the government’s plan to make Australia “a hot house” for fintech investment. On the agenda: A bid to end the onerous tax treatment of digital currencies such as Bitcoin.
“We will take action to address the double GST treatment of digital currencies. We won’t be taxing digital currency,” Morrison said in his remarks.
Currently, under a 2014 ruling by the Australian Taxation Office, Bitcoin is treated as a commodity in Australia and not a currency, meaning a 10% Goods and Services Tax (GST) applies to Bitcoin transactions and the goods purchased. That means people are “double taxed” when using Bitcoin to purchase anything also subject to GST.
The changes won’t be immediate and the fine print will still need to be worked out. In its fintech statement, the government proposes to “work with the industry on legislative options to reform the law,” noting there are “more than 600 digital currencies” currently available.
In an emailed statement, CEO of the Australian Digital Currency and Commerce Association, Nick Giurietto, said the change would create a “level playing field.”
“This reform means that digital currency businesses will now be treated equally with older payments systems,” he said.
Morrison’s remarks follow the Senate Economics References Committee review of digital currencies, which in August 2015 suggested the tax office had placed “an additional burden on Australian digital currency businesses.”
Digital currency startups have previously suggested the tax treatment of Bitcoin in Australia would force them to move overseas.
In a submission to the 2015 senate inquiry, U.S.-based bitcoin exchange company Coinbase urged the government to consider the UK model, which treats Bitcoin like a currency. “We believe this determination makes the most sense for electronic commerce whereas the alternative of treating Bitcoin as assets or commodities could create confusion,” it wrote.
The government’s fintech statement also proposes to remove tax barriers to investment in fintech startups, among other initiatives intended to kickstart the sector.
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